To advance the discussion, we post the two sides’ letters and invite further comment. Here’s Edwards:
Yours is a highly astute reading of this issue.
That Dow is in the clearest legal sense ‘successor in liability’ to its wholly owned subsidiary Union Carbide is indisputable. The form of the deal between Dow and Union Carbide Corporation (UCC) is a classic merger: Carbide’s accounts became consolidated into Dow’s; a proportion of the takeover price was paid in the form of Dow shares. As this article states, a merger involves assets and liabilities. That Dow didn’t own Carbide in 1968, 1978 or 1984 is irrelevant in the eyes of the law. All that matters is that Dow entirely owns Carbide now. That’s why when a raft of asbestos-related litigation filed against Carbide came to light shortly after the 2001 merger, billions were wiped off Dow’s—not Carbide’s—share price.
The chief difference between these asbestos liabilities and the Bhopal ones is geographical: Bhopal is not in the USA, therefore Dow is able to take advantage of the manifold difficulties that face any state attempting to enforce legal accountability against a multinational not headquartered within its borders.
Dow managers seem to have gambled that they could play the absence of an international accountability regime for multinationals in order to get away with having become— to all legal extents and purposes—Union Carbide. Dow could have thoroughly protected itself against this risk by picking and choosing the liabilities it would inherit from Carbide via the merger, if only it had been open about them in filings with the Securities and Exchange Commission. Instead, Dow failed to declare the existence of ongoing criminal proceedings concerning the deaths of over 20,000 people, or indeed civil litigation ongoing in the Southern District Court of New York addressing the separate matter of environmental contamination. Unrepentant, Dow perpetuates these lies-by-omission to its shareholders each year at its annual general meeting.
The unavoidable fact is that there is plenty of legal liability still attached to Bhopal. UCC remains on-the-run from charges of culpable homicide in India. In pusillanimous Carbide’s 16 year absence, Dow itself—a growing presence in India—has been issued a summons to attend and explain why it cannot produce its subsidiary in court. The summons is yet to reach Dow in the US because Dow hired a leading member of the ruling Congress party in India to apply for a stay order. That stay order will one day be lifted. Meantime, Dow continues to mislead its shareholders into believing that there are no Bhopal liabilities attached to Carbide.
Dow also turns questions concerning the former Union Carbide factory site in Bhopal into another red herring about ownership.
At no time did Carbide actually own the grounds of the site, instead they were taken on a 100 year lease from the Madhya Pradesh State government. Under the conditions of the lease, the land was supposed to be returned in a habitable and usable condition. Alas, over a decade of reckless housekeeping prior to the gas disaster had resulted in thousands of tons of process and waste chemicals being buried in unlined pits inside the factory, leading to a massive contamination problem. Thus, from 1989, Union Carbide had to be involved in an assets-recovery and site remediation project at the heavily polluted site, which was monitored by one local branch of government, the Madhya Pradesh Pollution Control Board.
Secret bio-assay tests conducted by Carbide on soil and water in 1989 caused 100% mortality to fish. Instead of informing local authorities, Carbide hid the results and took minimal action to prevent further contamination while maximizing assets recovery. Internal documents show that UCC wanted to be rid of the site as quickly as possible but were frustrated by the legal conditions attached to the lease. Then, in 1994, Carbide was inexplicably given permission to sell its shares in its Indian subsidiary, UCIL, which had already been seized by Indian courts due to the fact that Carbide was (and continues to be) a fugitive from the ongoing criminal proceedings concerning the unprecedented mass homicide caused by its gas disaster.
UCIL subsequently became Eveready Industries India ltd (EIIL), though the staff at the site, including the UCC trained manager, remained the same, continuing the slow, reluctant remediation process. That is, until they got lucky: in 1998, another branch of local government, seemingly unaware of what the left hand was doing, wrote to EIIL to ask if they were still using the land for industrial purposes and, if not, to return the lease. EIIL responded with barely suppressed glee that they were not using the land and asking for a date to return the cursed lease. The lease was duly returned in July 1998. The Pollution Control Board realized the mistake and demanded that EIIL come back and finish the work but the Union Carbide trained manager refused, citing the hand over of the lease.
Much as Dow’s attitude toward the criminal proceedings reveal a desire to escape the rule of (largely Anglo-Saxon) law in India, Dow’s stance on the contaminated site is an implicit repudiation of that bastion of environmental protection, the ‘polluter pays’ principle, which exists in Indian common and statutory law just as it does in the US and elsewhere. In effect, Dow is saying that it refuses to abide, voluntarily, by this internationally accepted law.
It’s rare that such a criminal escapes justice forever, and even $50 billion Dow is no exception: the Law Ministry of India recently issued the considered opinion that if there was any liability for Bhopal, it would have to be borne by Dow. As Dow’s future business strategy hinges upon access to the South Asian market, justice will not be denied for much longer.
Tim Edwards Editor, Bhopal.net