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“All Citizens are Equal before Law and are Entitled to Equal Protection of Law”-Article 27 of the Constitution of the People’s Republic of Bangladesh

Issue No: 172
June 5, 2010

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Reviewing the views

Legal action against mass disasters: Lesson from Bhopal case

Fayazuddin Ahmad

THE humankind has witnessed some very atrocious industrial disasters, in which thousands of defenceless people got killed, and several others injured with some suffering life-long effects including the un- born, and destructive ecological effects. Others have suffered ill health from exposure, at their work places, to poisonous industrial substances and processes where some people actually died. In most cases mass actions end up in settlements with no clear precedent that would hold authors of mass disasters to account as litigants have to overcome the hurdles embedded in various domestic laws related to: choices of law and forum, proof of liability especially in parent-subsidiary structure, mobilization of representation and funds, and assessment of damages. Considering few major catastrophes' in last one decade in Bangladesh this needs to be scrutinized and understood in depth.

In Bhopal, Union Carbide India Limited (UCIL) in whose premises at the state of Madhya Pradesh the highly toxic gas- Methyisocyanate (Mic) escaped was a 50.99% subsidiary of UCC, a United States (US) resident. UCIL produced Sevin and Temik. The gas, Mic which escaped was an ingredient in these products. The gas leaked from the plant in huge quantities and with the prevailing winds on the fateful day, the poisonous gas was blown to an overpopulated area adjacent to the plant resulting in estimated deaths of 2100 with another estimated 200,000 suffering permanent, mild, and temporary injuries. The individual victims of this gas leak filed class actions in Texas state court seeking compensation.

In actions where, for one reason or another, there are two or more jurisdictions as it were in Bhopal either jurisdiction could properly exercise legislative jurisdiction, there arise problems of choice, and conflict of laws particularly, where parties had not agreed, prior to the dispute, the applicable law or, where a relevant domestic law is silent or vague. In such cases, courts must, determine the applicable, and appropriate law.

In Bhopal, had Lord Keenan ruled that, US court was the most convenient forum, it would not of itself make US law is automatically applicable. It would still require a further step, namely, to choose between Indian law, the lex loci deliciti commissi, and US law, having in minded the parties' interests and ends of justice. In determining this question, courts have tended to apply different approaches and theories. In US for example, where domestic laws conflict with international law, courts are obliged to apply domestic law.

If, questions of law are settled, courts have to go further and determine where there are two or more jurisdiction available, which of them is suitable, fair and appropriate in all interests of the parties, and the case. In Bhopal, both US and Indian jurisdictions were available but court stayed the matter on ground of forum non conveniens holding that Indian courts were the most appropriate in the circumstances.

The court in Bhopal was convinced that Indian legal system was as equally developed, and competent to try the matter. However, Indian court's competence was not in issue, rather, whether Indian courts had jurisdiction over UCC, a US domiciled company. It is this uncertainty which drove the claimants in this case including the Indian government to sue in US courts. In Bhopal, perhaps, had Lord Keenan considered other factors testing each against the other, even if ultimately the forum ended in India, the ruling would have been more plausible or even arrived at a different conclusion altogether.

Establishing liability parents for the wrongs of subsidiaries is perhaps, the biggest legal hurdle in actions of mass disaster. The parent-subsidiary structure is a relatively new corporate form where several business enterprises come together for commercial purposes but with no clear role demarcations. Parents share in the proceeds of subsidiaries in good economic times but are not directly liable for any loses or liabilities of subsidiaries.

Needless to say, in both cases, liability was not determined substantially by court as parties entered settlements before judgments. This is a tort law concept where the claimant asserts that the defendant owed him a duty, that duty was breached, and in fact, the injury suffered was a direct consequence of the breach. So far, court decisions have shown that that duty is not automatic. Claimants have to link parents to subsidiaries' acts showing that a subsidiary is an agent or alter ego of the parent to establish this duty. It is then, that the acts of a subsidiary can be attributed to a parent, and naturally, a duty of care arises.

Discharging this obligation therefore, requires proof of the actual relationship between parents and subsidiaries of not only financial stake of parents in subsidiaries, but also parents' influence on day-to-day affairs of subsidiaries. The claimants have to show that there is no way, given the nature and extent of the existing parent-subsidiary relationship, a subsidiary can be said to ever exercise an independent decision in a single matter. Unfortunately, most information is always in the domain of the parent and accessing it can be enormously hard yet, courts are reluctant to lift the corporate veil of parents.

Assessment of Damages is another interesting head in litigation of mass disasters. Closely related with choice, and conflict of law, whose standard of living would best deliver justice in the interest of all the parties? It is obvious; contests of damages are high pitched. The claimants would want the highest assessment possible, yet, the defendant is interested in minimizing the damages as much.

The success or failure of an action of mass disaster as in Bhopal depends on how organized claimants are. The ability of victims of mass disasters to come together and assemble necessary evidence, and resources for redress is therefore vital in this regard which could mean further, capture local and international support including the civil society. This involves gathering of evidence, lining up witnesses, and securing specialist and well resourced attorneys to prosecute the case.

The recommended alternative approaches to full blast litigation for mass disasters could be the Alternative Dispute Resolution, and 'enterprise' law. Alternative Dispute Resolution (ADR) is where parties settle a dispute without recourse to court. It can be with or without a neutral third party. The parties usually determine the rules. ADR is a workable option in mass disaster dispute only, in cases where there is no substantial dispute of law. It is particularly helpful, where one party has admitted liability. The parties then go about negotiating the extent of liability, and the quantum of damages.

Enterprise law would treat all companies in a group as one economic unit disregarding corporate principles as limited liability in parent-subsidiary structures. This would be so in all respects; tax, liability etc. The distinctness of parent-subsidiary would almost die out. This would ensure that parents that open up subsidiaries have a parental role over them to ensure subsidiaries meet minimum operational standards.

In above it is evident that litigation of mass disasters has not build as much precedents that could be used subsequently to regulate ultra-hazardous corporate activity. The cases of Bhopal ended up, after such a long time, into settlement, because of largely undue regard, by the trial courts, to technicalities rather than substantive issues. The courts occupied themselves with questions of forum, and locus leaving out questions of liability, a single key issue, which would guide future corporate activity especially production of toxic products.

Aggressive expansion of global corporate activity no doubt potentially endangers both human life and the environment. The scenario in Bhopal show clearly need for these domestic variances to be looked into and courts have a lead role in this regard. As it stands, corporations enjoy liberty to set corporate activity anywhere, with little or no legal checks on maintenance of industrial standards, or good production practices thereby exposing immediate populations to great risks which otherwise could be controlled.

The writer is a legal analyst.


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