Extractives

Responsibilities Beyond Borders

Commentary, 30 June 2010

By Salil Tripathi, Senior Advisor, Global Issues, IHRB

Efforts to stop the biggest environmental disaster in US history continue in the Gulf of Mexico with few signs of progress. The explosion on an oil rig in April which was operating one of the Gulf’s deepest oil wells killed eleven workers. The flow of crude from the site continues to pollute and cause serious damage to livelihoods and the future of the region.

The United States Government is angry. President Barak Obama got BP, the company responsible for the rig, to agree to set aside $20 billion to pay for compensation. This is the down payment; the US Government reserves the right to initiate legal proceedings against the company, and the amount of total compensation may change.

Over 3,000 people died instantly; over the past quarter century, activists say some 12,000 people have died prematurely.

The officials found guilty in the case received two years in prison for their role in the incident but appealed and were granted bail. Reacting to the verdict, the State Department said this should bring closure to the matter.

But it is not that simple. When the accident occurred, the parent corporation, Union Carbide, owned 50.9% of the Indian operations. It was an American company. Its then chairman and chief executive, Warren Anderson, came to India immediately after the disaster. He was promptly arrested, but granted bail. He left the country quickly, never to return. Subsequently, Indian courts have declared him an absconder, and Anderson remains in the United States, living in good comfort at his home. Indian activists have long sought his extradition; the Indian Government has made no such formal request. While the United States cannot respond to speculative demands for extradition, opinion in India suggests that if India now asks for Anderson’s extradition, the United States will not oblige.

Union Carbide successfully argued in an American court, that litigation arising from the disaster was best dealt with in India. The US court agreed. It also says the accident was the result of sabotage. In India, the Government prevented the victims from seeking individual compensation, passing legislation which made the state the sole negotiator, and in 1987, arrived at a settlement for $470 million which was not only approved by the Parliament, but also by the Indian Supreme Court. The adequacy of that settlement apart, it points out the importance of the “polluter pays” principle, as Martin Khor noted recently.

Indian academic Upendra Baxi has taken his government to task over this, but his criticism hasn’t swayed the government. Union Carbide said it had no further responsibility. Two years later, Union Carbide sold the plant where the accident occurred to McLeod Russell, an Indian company with interests in tea. A few years later, Dow Chemicals acquired Union Carbide.

For the victims in India, this combines the worst possible scenarios: their government did not regulate the industry properly; their factory inspectors possibly ignored warning signs; after the disaster the government prevented the victims from suing the corporation; it arrived at a settlement on their behalf, and there are credible allegations that all the money did not reach the victims; it made no attempt to clean up the facility - because of which chemicals stored at the plant are reported to have seeped into the city’s groundwater, prolonging the agony of the people; successive Indian governments did little to reopen the case and seek Anderson’s extradition; and the Supreme Court reduced the charge from culpable homicide to negligence, which meant the maximum punishment was significantly disproportionate to the gravity of the accident.

Many Indians rightly hold their own government accountable for this sorry state of affairs. But it is facile to conclude that companies should get let off, or that home governments have no responsibility. Just as President Obama aggressively took on BP, getting it to set aside a fund to pay for the environmental damage, the Indian Government in 1984 could have – and should have – played hardball with Union Carbide.

It did not. But that does not mean the US Government in 2010 should have concluded that it was time for closure over the Bhopal tragedy.

For if that view prevails, it essentially means that all people are not equal; that the value of human life varies, depending on the place of an individual’s birth. Making such an argument is against the interest of companies seeking the social licence to operate. Even if this argument is valid legally and technically, it is weak morally, and it undermines the company.

What should companies do in a similar context in future? Should they depend on the law alone? Or should they look beyond the law? True, companies hesitate about moving beyond what the law requires them to do, because it sets standards and precedents. But if companies do nothing, they lose their social licence to operate. If multinational companies are resented in many parts of the world by local communities, it is because the historical memory of those communities is long.

When the late Rajiv Gandhi was India’s Prime Minister and visited the United States in the mid-1980s, soon after the Bhopal disaster, reporters asked him if India was suspicious of foreign companies. “Yes,” he said, “we used to know a multinational called the East India Company,” referring to the British company which came to India to trade, and ended up establishing British colonial rule in India. Many companies are aware of the troubled history, and take pains to remind their staff and stakeholders that they aren’t sovereign, states are, and they only obey, or comply with, laws the state has decreed.

But there is a third actor in this drama – the home state. What is the responsibility of the US Government in the context of Bhopal? Granted, Union Carbide doesn’t exist in its earlier form anymore; and Dow Chemicals did not own Union Carbide when the disaster occurred. Even if Union Carbide failed in its responsibility to respect human rights, and the Indian Government failed in its obligation to protect human rights, does the US Government bear no responsibility? Does it not have the responsibility to enforce its own law and prosecute the conduct of an American company abroad? The Foreign Corrupt Practices Act prohibits American companies from bribing officials abroad; should they do so, US prosecutors would go after them. If existing laws do not permit it, is there not a need for legislation so that a home government can restrain, regulate, and prosecute acts committed by companies registered under its jurisdiction, while operating abroad?

Applying laws extraterritorially is never easy and as things stand, it requires creativity and ingenuity to make such an argument before a radical judiciary. Some even argue that extending domestic law abroad shows cultural relativism, interventionism, and imposition of domestic standards abroad.

But as the Red Flags initiative has demonstrated, companies may face criminal liability when their activities contribute to international crimes. John Ruggie, the UN Special Representative for business and human rights has initiated a project to explore the extraterritorial scope of state duties. As part of the project, Jennifer Zerk has recently published an important report, Extraterritorial Jurisdiction: Lessons for the Business and Human Rights Sphere from Six Regulatory Areas [222 pages, 1.18mb] which outlines extraterritorial scope with regard to anti-corruption, securities law, anti-trust laws, criminal and civil jurisdictions, and environmental regulation.

Avoiding action because the current law is not adequate is a weak reason – and less relevant - when measured against the universality of human rights, whose simple, clear message is that all people, wherever they are born, are equal. And something is fundamentally flawed when the fine for the company has to pay after a tragedy like Bhopal, works out to 55 cents per death. Holding companies accountable for their misconduct, wherever the misconduct occurs, must become a priority, if we are not to have more Bhopals.

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