The Bhopal Gas Tragedy

THE SETTLEMENT

Within months after the disaster, the GoI issued an ordinance appointing itself as the sole representative of the victims for any legal dealings with UCC as regards compensation. The ordinance was later replaced by the Bhopal Gas Leak (Processing of Claims) Act, 1985. Armed with this power, the GoI filed its suit for compensation and damages against UCC in the United States District Court for the Southern District of New York. Besides filing the suit, one of its prime responsibilities was to register the claims of each and every gas victim in Bhopal. Analysts felt that this job was never done, or rather, not with any seriousness for the next ten years. The government set up various inquiry commissions to investigate the causes of the disaster; they remained half-hearted initiatives at best. UCC, on the other hand, moved more quickly with its 'investigations': it announced by March 1985 that the disaster was due to 'an act of sabotage' by a Sikh terrorist. Then they shifted blame to a disgruntled worker.
 

In May 1986, Judge J.F. Keenan ruled that India and not the US was the appropriate forum for the Bhopal compensation litigation. In the first pre trial hearing in the consolidated Bhopal litigation in US federal courts, John F Keenan, asked UCC as 'a matter of fundamental human decency' to provide an interim relief payment of $5 - 10 million. UCC agreed to provide $5 million, provided a satisfactory plan of distribution and accounting of the funds was devised. For 8 months, the UCC and the GoI haggled over terms of reference and conditions for using the $5 million interim relief. Finally, in November 1985, the parties agreed to channel the money through the American Red Cross to the Indian Red Cross. Even after one year of the tragedy, no one-not even the official of the MP Government in charge of relief for the victims-had any idea what the Red Cross would do with the money.

On December 17, 1987, a Bhopal District Court Judge passed an order directing UCC to pay Rs. 3.5 billion as interim relief. UCC challenged this order in the MP high court (at Jabalpur) on the grounds that the trial judge was not authorised to pass the order under any provisions of the Indian Civil Penal Code. On April 4, Justice S. K. Seth of the High Court upheld the liability of UCC for the Bhopal disaster, but reduced the interim compensation to Rs 2.5 billion. UCC appealed to the Supreme Court of India against the High Court order saying "No court that we know of in India or elsewhere in the world has previously ordered interim compensation where there is no proof of damages or where liability is strongly contested." ^[8]On February 14, 1989, the Supreme Court directed UCC to pay up US $ 470 million in "full and final settlement" of all claims, rights, and liabilities arising out of the disaster. The Supreme Court of India ruled that the $470 million settlement was "just, equitable and reasonable."

UCC described the court's decision as fair and reasonable, and the company's stock soared in the London market. Analysts felt that the Bhopal Gas disaster, which left thousands of people dead and injured, was settled for a mere US $ 470 million-which worked out to around Rs. 10,000 per victim (if it was divided equally). In the same year, a leading national daily^[9] stated that approximately US $ 40,000 was spent on the rehabilitation of every sea otter affected by the Alaska oil spill.^[10] Each sea otter was given rations of lobsters costing US $ 500 per day. Thus the life of an Indian citizen in Bhopal was clearly much cheaper than that of a sea otter in America.

QUESTIONS FOR DISCUSSION:

EXHIBIT I THE SITE FOR THE PESTICIDE FACTORY

ADDITIONAL READINGS AND REFERENCES:

^[8] An independent investigation carried out by Arther D. Little, Inc, on behalf of UCC, showed that the Bhopal incident was caused by a disgruntled employee who introduced a large volume of water by connecting a water hose directly to the tank.

^[9] The Times of India.

^[10] Exxon was involved in a major disaster in 1989, when one its tankers met with an accident and spilled 11 million gallons of oil in Prince William Sound in Alaska. The oil tanks of the Exxon Valdez were ruptured in a collision off the coast of Alaska.

2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic or mechanical, without permission.

To order copies, call +91- 8417- 236667 or write to ICMR,
Survey No. 156/157, Dontanapalli Village, Shankerpalli Mandal,
Ranga Reddy District,
Hyderabad-501504. Andhra Pradesh, INDIA. Ph: +91- 8417- 236667,
Fax: +91- 8417- 236668
E-mail: info@icmrindia.org
Website: www.icmrindia.org