India, Switzerland and the United States: How Countries Avoid Liability after Disaster
by Karyn Keenan
Mass disaster, illustrated by the tragic Bhopal accident, often affects multiple parties, both individuals and nation states, and involves several legal jurisdictions. To resolve such a legal conundrum, it is instructive to examine which parties escape liability as well as those who fall prey. Significantly, in several of the worst international accidents involving hazardous technologies and activities, nations that were arguably responsible for the damage sustained, at least in part, escaped liability. This paper explores how both importers and exporters of dangerous technology avoid accountability, and whether or not the legal apparatus exists for their prosecution.
IMPORTING COUNTRIES
India's failure to adequately plan for the plant's associated risk became obvious in the aftermath of the accident. Medical facilities were unprepared for the disaster, and the local community had been given no information regarding the risk inherent in plant operations. Neither warning nor emergency procedures had been established (Cassels, 1991). Moreover, the Indian Government failed to respond when the risk of serious incident became known. A series of leaks, one involving the death of an employee, preceded the December, 1984 accident.
Significantly, Indian financial institutions owned approximately twenty per cent of UCIL stock (Cassels, 1991). In addition, Muchlinski (1987) reports that originally, UCC preferred not to construct a plant in India, but rather, to import pesticides manufactured in the United States. India desired self-sufficiency in pesticide production and accordingly, opposed UCC's proposal. UCC gave in to India's requests and agreed to construct the Bhopal plant.
India's failure to draft, implement, and enforce effective regulatory legislation, its neglect for government inspection departments, its failure to respond to obvious signs of impending crisis, its poor performance in anticipating and planning for potential accidents, its interest as a minority owner in UCIL, and finally, its responsibility for the establishment of the plant, point to certain liability in connection with the Bhopal disaster.
Despite compelling evidence of culpability, India's liability toward disaster victims was never considered in the litigation. Following the accident, Americans initiated suits in their domestic courts on behalf of thousands of Indian litigants. In response to the extraordinary circumstances of the situation, including the enormous number of litigants, their inability to effectively seek relief, and the international character of the incident, The Bhopal Gas Leak Disaster Act (Bhopal Act) was passed. This Act gave the Indian federal government parens patriae control of the case, allowing it to appropriate the exclusive right to act on behalf of any person who wished to make a claim with respect to the accident (Abraham et al, 1991). Absolute control over the litigation allowed India to ignore any claim brought against itself. Moreover, as the representative plaintiff, it's questionable whether it would be possible for India to sue itself!
This unprecedented act did not pass unnoticed. Bhopal victims claimed that the statute unfairly denied them of control over the proceedings. Others argued that because India was potentially liable both as a shareholder in UCIL, and with respect to its regulatory duties, conflict of interest barred it from acting as the victim representative. Furthermore, the Act jeopardized all future judicial decisions. American courts hearing the case or enforcing an Indian decision were likely to question the legality of the Bhopal Act. It is suggested that the Act both infringes upon individual rights and fails to meet acceptable standards of due process, and accordingly, would prevent a successful claim of the parens patriae doctrine (Cassels, 1991). Post settlement, the constitutionality of the Act was challenged. In December 1989 the Supreme Court of India upheld the statute, explaining that the Government's use of the parens patriae power was justified, considering the imbalance in available resources between UCC and the victims. The Court also stated that the interests of the victims were sufficiently protected by the Act (Cassels, 1991).
The Indian Government's ability to pass legislation granting it exclusive, parens patriae power to control the Bhopal litigation precluded any inquiry into its culpability. The ruling of the nation's most exalted judiciary fortified this position. However, India could not legislate away the counter-claim of its defendant. UCC counter-sued the governments of both Indian and Madhya Pradesh in the Southern District Court of New York. The suit was maintained following relocation to India. However, settlement between India and UCC prevented the resolution of this counter-claim (Koh, 1989).
On October 31, 1986, fire broke out in the warehouse of the Swiss pesticide manufacturer, Sandoz. Due to the absence of an established catchment area, fire-extinguishing efforts washed thirty tons of the chemicals into the Rhine. In contrast to the Bhopal disaster, the corporation utilizing hazardous technology in this case was domestic, and the accident caused transboundary damage. However, both cases involve international claims. In both situations, the plaintiffs privatized their claims, and the nation that was home to the dangerous activity avoided liability.
Through inadequate supervision over both the development and implementation of Sandoz's emergency plans, as well as its storage methods, Switzerland breached its obligations under the Berne Convention on the Protection of the Rhine against Chemical Pollution. Furthermore, Switzerland failed to satisfy its obligations under Articles 7 and 11 of the Rhine Chemicals Convention, regarding the storage of chemicals, containment of spills, and the notification of the International Commission for the Protection of the Rhine (ICPR) (d'Oliveira, 1991).
Despite these breaches of both its international legal obligations and domestic responsibilities to regulate industry, no claims were brought against Switzerland, either by the foreign governments, which were affected, or by private citizens who sustained damage. Instead, all responsibility was placed, in accordance with the polluter pays principle, on the shoulders of Sandoz. The most important claims from foreign litigants were those made by the Governments of the Netherlands, France and Germany. These countries channeled all claims from their nations directly to the Swiss Government, who transferred them to Sandoz. The Swiss Prime Minister personally pledged the support of Swiss offices for the purpose of reaching settlement. The claim channeling strategy was extremely efficient and by mid-1988, over ninety percent of claims had been processed. The majority of unsettled claims were Swiss.
The Swiss strategy was to create an efficient government-clearing house for claims, which dealt preferentially with foreign claims. This strategy likely included Government pressure on Sandoz to quickly resolve the claims through settlement, in order to avoid litigation that could easily have involved the Swiss. It is conceivable that Sandoz received some form of compensation for its compliance. Although successful, no strategy, regardless of its efficiency in concluding settlement, would have deterred litigation if the injured parties were determined to sue. D'Oliveira (1991) suggests that the Netherlands, Germany and France were aware of the significant possibility that any one of them could find itself in Switzerland's position in the future. By ignoring Swiss liability, it is probable that they anticipated comparable future treatment. Furthermore, these countries wished to maintain friendly relations at the ICPR.
The Indian and Swiss governments adopted different, but equally effective strategies for avoiding liability. Exclusive legislative power and unacceptable high probability of future European accidents were the tools handily wielded by India and Switzerland.
EXPORTING COUNTRIES
Nothing was done in India. The corporate safety and health audit, which revealed this information, was the only one of its kind for Bhopal in seven years of operation. In contrast, American plants were audited every two years. Furthermore, other industries manufacture MIC using a far less toxic process than UCIL. Still other manufacturers choose not to use MIC, or store it in small amounts only, converting it to product as quickly as possible (Castleman et al, 1985).
Based on the few examples listed above, it is clear that UCC took advantage of the foreign locale of its subsidiary and failed to enforce U.S. standards of industry regulation on UNIL. What is at least as significant, however, is the failure of the United States to enforce the implementation of those standards on UCC. Despite arguable liability on the part of the United States for the unsafe operation of UNIL, India failed to bring a claim for American breach of international law, or to seek a bilateral agreement for reparation. India instead privatized its claim. By characterizing itself as an injured state to which UCC owed liability, rather than as an international plaintiff, India avoided vulnerability to counter-suits in international law.
The Amoco Cadiz supertanker grounded in the territorial waters of France in March, 1978, spilling dangerous quantities of crude oil. The ship was owned, through various subsidiaries, by the American company, Standard Oil. The Spanish company, Astilleres Espanoles, designed and constructed the ship. The Government of France, joined by other injured parties, initiated litigation in the American court system. Standard, its subsidiaries, and Astilleres Espanoles were found liable for negligent design, construction and maintenance of the ship. However, no claims were made against the United States for its failure to regulate the extraterritorial operations of Standard.
Scovazzi (1991) argues that it is doubtful that a principle of customary international law has been established which requires states to regulate the activities of their MNCs abroad. This uncertainty in the law may have discouraged France from bringing an action. Moreover, like India, France may have feared exposing itself to possible counter-suit as the host country within whose jurisdiction the accident occurred.
Handl (1985) supports Scovazzi's assertion, and states that under customary international law, a country which authorizes the export of a hazardous technology is not liable for accidental damage occurring in the use of said technology. In the absence of international law, Handl (1985) looks to the criterion of control over the technology to determine responsibility. He argues that practically, the host country exercises this control. However, control can be defined expansively. Maritime law illustrates the principle. Generally, vessels are deemed to be in the control of their states of origin (Flag State), despite the fact that they may be found in the territory of another. This is especially true with respect of those areas of operation over which the host country exercises no control, such as construction of the ship and the operation of its equipment. Applying this principle to MNCs in place of ships, the United States would be held responsible for damage occurring as result of inadequate safety measures regarding those aspects of operation over which it had greater control than India. Considering that the U.S.A. controlled the plant design and construction, as well as the technology utilized in the plant, its prescriptive jurisdiction over UNIL operations is a convincing reason for holding the United States liable.
In its document, Liability for Injurious Consequences Arising Out of Acts Not Prohibited by International Law, the International Law Commission argues that an exporting state should be subject to strict liability for damage arising out of accidents concerning an area over which it has prescriptive jurisdiction. Smith (1988) argues that the appropriate standard is due diligence, but that if an exporting country is aware that the host lacks the technical and administrative capabilities necessary to prevent the dangers associated with the technology, due diligence may require prohibiting exportation.
Francioni (1991) contends that the argument used by home countries that they lack the jurisdiction to enforce domestic safety and environmental standards on MNCs located abroad is hypocritical. Exporting countries have successfully applied their antitrust laws, fiscal and currency regulations, and trade union laws, among others, to MNCs.
This author further argues that international law provides a basis for home country liability. Principle 21 of the Stockholm Declaration on the Human Environment states that nations are responsible to ensure that activities, which are within their jurisdiction or control, do not cause environmental damage. Francioni (1991) argues that the concept of control includes the type of power exerted by parent corporations over their subsidiaries. He also looks to international human rights law. Several international instruments proclaim the right of individuals to a healthy environment. If the export of a hazardous technology jeopardizes the health of the host country's environment, the exporter could accordingly be found liable in international law.
Although several convincing arguments exist for holding exporting nations liable, developments in the regulation of MNCs do not support this contention. International organs are increasingly involved in the drafting of MNC codes of conduct. Neither the U.N. Draft Code of Conduct on TNCs, nor other similar instruments provide exporting state responsibility for noncompliance of parent companies (Handl, 1985).
Until the ability of government to legislate absolute control over MNC accident litigation is challenged and potential plaintiffs overlook their self-interest as future polluters, importer liability will be avoided. Similarly, despite the possible legal foundations described above, exporter liability remains undeveloped. This weakness must be addressed in order that countries such as India, Switzerland, the United States are held responsible for their reprehensible behaviour.