Bhopal gas tragedy in tort law

One of the most tragic industrial disasters in the past few centuries, the Bhopal Gas Tragedy, was witnessed just after the midnight on 3rd of December, 1984 when a highly toxic gas Methyl Isocyanate (MIC) escaped from a tank killing many thousands and devastated the lives of tens of thousands of people. My aim today after 25 years of this mishap is to recount the story of Bhopal and to bring out the importance of tort law perspectives.

Bhopal being a mass tort law case uses law and economic tools such as loss spreading, risk attitude, moral hazard, transactions costs, and cost minimization or social efficiency to be examined. Race, class, gender, pragmatism, social justice, and other sociological factors play an important role in many tort cases as well. There are many tort law perspectives by which a tort case can be analyzed namely: Law and Economics; Corrective Justice; Critical Race Theory; Critical Feminism; Pragmatism; and Social Justice. In this essay I am mainly bringing out the facts of the tragedy and the importance of Law and Economic Perspective which favors an industry such as the Union Carbide Corporation (UCC) in this case and also the Social Justice Perspective which speaks in favor of the people of Bhopal.

Law and economics is an interdisciplinary field that applies economic theory to examine the formation and the impact of tort law and the tort damages. It focuses mainly on deterrence, paying little attention to justice, fairness, or distribution. It is a tool to assess the costs and benefits that UCC was looking as an outcome of setting up a plant in India - Union Carbide India Ltd (UCIL) - a subsidiary of the Union Carbide Corporation (UCC). We need to determine who bears the burden of the injury and if this injury caused by UCC are compensable to what extent. Two important forms of tort law which can be used to analyze are Positivistic Economics and the Normative Economics. Positive economics describes how legal rules influence behavior whereas normative economics prescribes change that will increase of legal rules and institutions.

One reason for injustice to the people is that tort law is undeveloped in India. There has been little doctrinal development and tort is little used and has remained largely outside the consciousness of Indian lawyers and public. There has been little connection between tort law and disasters in India. What typically happens in disasters is that the government announces that it is making ex gratia payments of a specified amount to the victims. The attributions of responsibility would be done by Governmental investigations, commission of inquiry or a criminal prosecution. Similarly, in Bhopal's case there has been insufficient inquiry and due to the inadequate compensation mechanisms the people were deprived of compensation for their damages. In comparison to the American system, claiming damages in tort law would have been much simpler and easier. If a disaster such as Bhopal had happened in the United States of America, it would have been much simpler to extract a substantial amount of money, and possibly resulting in Union Carbide's bankruptcy.

Night between 2nd and 3rd of December, 1984, Union Carbide Pesticide plant located in the northern part of Bhopal, Madhya Pradesh, India, leaked 40tons of a highly toxic gas known as Methyl Isocyanate (MIC) from the tank E610 killing thousands of people the very first day of the tragic event. Approximately 3828 died on the day of the disaster and over 30000 injured. This figure has increased unbelievably ever since. It cost several thousands of lives in the next few days and led to long term medical effects such as eye problems, respiratory difficulties, immune and neurological disorders, cardiac failure's, and birth defects among children born to affected women.

As the night passed by, hundreds of American lawyers flocked to the rescue of the affected and resulted in claims filed over various US courts. The Indian government now declared itself as “parent spectra” by passing the Bhopal gas Disaster (processing of claims) Act 1985 to avoid such independent claims. The Indian Government made itself the sole Plaintiff for all the claims from Bhopal. On 8th of April, 1985, the Union of India filed a suit in the U. S. District Court of New York to claim for damages for the affected. Indian government's preference for an American Court was mainly due to the chances of heavier damages being awarded by an American jury, uncertainty about whether the multinational giant Union Carbide Corporation (UCC) would submit itself to the Indian jurisdiction of the Indian courts and also the lack of confidence in the Indian Judicial System. The appeal was dismissed in favor of UCC by Judge John F. Keenan on the grounds of forum non conveniens (inconvenient forum); pointing out that such a suit could be definitely more conveniently tried in Indian courts.

The primary base for Judge Keenan's estimation to lay out such dismissal was by the judgment made in Shriram Gas Leak case in New Delhi (also known as the Oleum Gas Leak case or M. C Mehta Vs. Union of India) just a year after Bhopal. The Supreme Court in Shriram case laid down the principle of “Absolute Liability” in preference to the rule of “Strict Liability” laid down in an English case, Rylands Vs Fletcher. The court looked at the principles of liability and the compensations applicable to such cases and evolved new principles such as the “Absolute Liability”. This new principle laid down is that an enterprise engaged in a hazardous or inherently dangerous industry owes a strict, absolute and non-delegable duty and if any harm results on account of such activity, the enterprise is absolutely liable to compensation for such harm. As regard to compensation, the court said that the measure of compensation must be correlated to the magnitude and the capacity of the enterprise because such compensation must have a deterrent effect.

Looking at the progression in the undeveloped tort law country Judge Keenan assumed that victims of Bhopal Gas Tragedy will be able to get better compensation by its own legal system under this new liability principle for negligence. This judgment by Judge Keenan was criticized by the argument put forth by Cassel's book which concluded as follows:

“Judge Keenan was tragically wrong (in sending the case back to India)-wrong in his optimistic faith in both tort law generally, and the capacities of the Indian legal system, in particular.”

Cassel rightly sees Keenan's judgment as a victory for multi - national corporations, but it is worth nothing that it does contain some seeds to enhanced multinational accountability.

This seemed like the American court made poignant observations about the Indian Judicial System and tossed back the case to the District Court of Bhopal, where the Indian Government sued the UCC for 3billion U. S Dollars in damages. District Judge Deo, passed an order awarding interim payment of U.S $270 million to the victims.

In April 1988, Carbide approached the Madhya Pradesh High Court, and on the basis of more than a Prima Facie case having been made out, against the defendants, Justice Seth of the Madhya Pradesh High Court, relying upon the principle of Absolute Liability formulated in the Shriram case, awarded U.S. $192 million by the way of interim compensation. Both, UCC and the Indian Government being dissatisfied, the Bhopal case found its way to the Supreme Court of India.

On February 14, 1989, under the aegis of the Supreme Court the Indian Government and UCC reached an overall settlement of all claims from the Bhopal Disaster. Both parties promptly accepted the settlement without consulting their clients; the victims of the disaster and the corporation. The UCC had to make a settlement payment of U.S. $ 470 million to the Indian government on behalf of the Bhopal victims in full and final settlement of all the past, present and the future claims arising from this disaster. The Indian Government, the Supreme Court bench and other observers justified the settlement to be beneficial to the victims of the disaster looking at further litigation pendency of the Indian Judicial System which would last nothing less than 15 years.

Even though the settlement appeared to be no less than a raw deal on behalf of the Indian people by its Government, only a sum of U.S $330 million was sought to the people of Bhopal. This deal provoked criticism from various lawyers, environmentalists and jurists as the judgment has been seemed to be passed behind the backs of the people. In May 1989 widespread protests broke out and the Supreme Court agreed to review the settlement. On the backing of such professional people the victims of the disaster filed a Review Petition in the Supreme Court challenging the settlement order. In effect the Supreme Court on 3rd October, 1991, upheld the validity of the U.S $ 470million settlement under article 142 of the Constitution of India. This provision of the Constitution gives the Supreme Court the authority to take decision necessary for doing complete justice in any cause or matter pending before it. The Supreme Court decided to quash the criminal immunity granted to UCIL, thus paving the way for revival of criminal proceedings related to the disaster. A non - bail able warrant was issued against Warren Anderson, the chairman of Union Carbide India Ltd as he and UCIL were charged with Section 304 of the Indian Penal Code (Punishment for culpable homicide not amounting to murder). The court also expressed a hope that UCC will contribute Rs. 50 Crores to setting up of a hospital at Bhopal for the victims.

Carbide now announced the creation of Bhopal Hospital Trust in London with Sir Ian Percival as Sole Trustee and endowed its entire shareholding in UCIL to the Trust. It planned to transfer all of its present share money out of India through this new trust. The Chief Judicial Magistrate of Bhopal refused to recognize the creation of the Trust and endowment of UCIL shares. Later the Central Government announced a scheme of interim relief to the gas victims at Rs.200/- per month subject to a maximum of 5 Lakh victims for a period of three years beginning April 1, 1990.

A question to be asked from a law and economic perspective is whether Bhopal's burden of precaution exceeded the costs of injury that could be avoided. If this precaution to take such a burden exceeds the probability of the injury depending on the seriousness of the injury, that should have occurred, then the precaution is not cost justified.

Investigation of the Bhopal catastrophe showed that the responsibility of both the Government as well as the company went far too beyond the mere neglect of elementary safety measures. In an analysis in the British trade publication Project Management, a UN expert enumerated 16 factory shortcomings, 13 operational errors, 19 failures in communication and 26 short comings. A multi-billion dollar reputed company like UCC shocked the society with the mistakes it committed. The cooling system which was suppose to keep the MIC at a temperature of zero degrees Celsius to prevent a reaction, had been to turned off six months before the accident; same had been done for the burner in the tower for burning off the poison. Both steps had been taken with approval of the company headquarters. The scrubbers capable of neutralizing MIC exhaust fumes had been placed in passive mode two months before the disaster. This shows the lack of responsibility which should be compensated with larger amount of punitive damages than what was cheaply settled for as compensation.

Justice Bhagwati in the case of absolute liability said “the measure of compensation must be co-related to the magnitude and the capacity of the enterprise because such compensation should have a deterrent effect. The larger and more prosperous the enterprise the greater must be the amount payable by it.”

Union Carbide becomes a subsidiary of The Dow Chemical Company (“TDCC”) as part of a transaction valued at $11.6 billion. A multi-billion dollar corporation made a settlement with the Indian Government as cheap as $470 million for the injury they caused.

“Learned Hand Formula” suggested in United States v. Carroll Towing Co, gives the standard of care in negligence law which is ideally analyzed in terms of a formula comparing the costs of taking precautions (B), with the product of the likelihood of injury without those precautions, and the magnitude of such injury. If the burden is less than the product of the cost of injury and the probability of occurrence, then the company will not have met the standard of care. And if the burden is greater than or equal to the product of the cost of injury and the probability of occurrence, the company may have met the standard of care. If a reasonable person would recognize the act as involving risk of harm to another and the risk outweighs what the law regards as the utility of the act, then the act is negligent.

Say for example, the cooling system installation costs around $4 million. One accident with a cooling system turned off would cost the company $3 million and the probability is one accident in 250 days. So the risk is $12000 per day. An accident with the cooling system turned on, probability of one accident is worth $2 million every 1000days; risk is $200 per day. Since the burden would be 60 times greater if the cooling system is turned off it is economically efficient to have such a system to be working at all times.

Efficiency is understood as the optimal cost reduction in tort law and the aim is to minimize the sum of the costs of accidents and the costs of avoiding them. UCC should have taken adequate steps to minimize such loses in their business. If the government had legally restricted or kept a check on Carbide's functioning this mishap could have been avoided. This shows the Normative Form of Economics. With India having a liberal Government and open to new enterprises to invest has influenced greatly in the Positive Form of Economics.

The Indian Government plays a multiple role in this disaster. It was encouraging transnational corporations like Carbide to set up in India hoping it would create jobs and draw new technology and industry into this rapidly developing country. The government is also responsible for overseeing the construction and management of the Carbide plant, ensuring that it takes good standards of health and safety. The government for its negligence in this case would have had to face a lot of litigation but it made itself the sole plaintiff in all litigation arising out of the gas disaster by passing the Bhopal Act. This created enormous conflict in interest but finally as a sovereign nation responsible for the welfare of its citizens; the government had and continues to have the duty of care for its victims.

Union Carbide and Madhya Pradesh Government - partners in progress were set to work this dangerous factory within the city limits. The government had no knowledge of the MIC technology and designated the plant as ‘non - hazardous chemical plant' because its final product, fertilizers seemed to be an essential requirement. The company also never provided more than 1400 jobs, and on an average fewer than 1000. But it did give lucrative employment to the relatives of VIP's. It entertained politicians lavishly at its guest house, and invitations were always much sought after. It has been widely believed that the company has funded a political party for its political benefits. It gave donations to Congress (I) party run, scandal - ridden charities. So the interests of Union Carbide were enmeshed with those in Indian State and its elite.

Social justice theorists consider tort law as a device for correcting imbalances in political powers. In a corrupt society as India's, ruling political parties take advantage of their power and get all the necessary provisions for an enterprise like Carbide which would readily fund their party in return. As a result these interests of parties pursue self-interest at the expense of public by producing dangerous products and hiding critical information about their dangerousness. By aiding citizens with the power to sue corporations for misconduct outside of the legislative and regulatory process, tort law serves to correct this imbalance of power.

Negligence is the failure to take adequate care and this care requires one to take cost-justified precautions. Precautions can be cost-justified whenever their cost is less than the costs of the harm risked; by not taking precautions, discounted by the probability of the harm's occurrence. Once this concept of negligence is understood as the failure to take the cost justified precautions we need to decide what decides imposing liability on those who have failed to take these precautions. The economic analysis primarily relies on this concept of negligence. In conclusion, I see a great level of negligence by Carbide and its failure to take cost justified precautions led to this disaster. Union Carbide should be held liable for all the damages to the people of Bhopal. The least the Indian Government can do for the people of Bhopal is to provide them with clean drinking water, clean up the hazardous chemicals from Bhopal and most important is to introduce an efficient compensating machinery to help the victims financially. Indian Government can also introduce an empowered national commission with the necessary authority and the funding for all the activities related to Bhopal. As far as my knowledge is considered this is already introduced but pending. In a democratic government like India this is a long process which requires clearance from the Cabinet. The most important pointer the government should take by this disaster is to avoid such hazardous enterprises to enter into India and if it cannot, it should take every precaution to avoid such catastrophic disaster!